China has prolonged the Value-Added Tax (VAT) exemptions on the interest income from loans to small businesses. The announcement affirms the extension of preferential tax policies relating to the financing of micro and small businesses, sole proprietors, and farmers. Many of the policies were introduced in 2017 and was about to end on 31st December 2019 are now extended to 31st December 2023.
The order aims to provide support and encourage the growth of companies and entrepreneurs. The policies also include the allowance of input tax deductions for fixed asset leasing. VAT expense incurred in 2020 before the date of announcement shall either be deducted or refunded to the taxpayers.
China is one of the few countries that impose Value-Added Tax (VAT) on financial services. Australia is another country which also levies VAT on banking and insurance services
